LYNAS: GROWING THE MARKET OUTSIDE CHINA - Argus US Specialty Metals conference 7 June, 2019
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LYNAS: GROWING THE MARKET OUTSIDE CHINA Argus US Specialty Metals conference 7 June, 2019 1
Disclaimer
This Presentation has been prepared by Lynas Corporation Limited (ABN 27 009 066 648) (Lynas or financial position and performance are also forward-looking statements. Forward-looking statements,
the Company) This Presentation contains summary information about Lynas and its subsidiaries opinions and estimates provided in this Presentation are based on assumptions and contingencies
(Lynas Group) and their activities current as at the date of this Presentation. The information in this which are subject to change without notice, as are statements about market and industry trends,
Presentation is of general background and does not purport to be complete or to comprise all the which are based on interpretations of current market conditions. Such forward-looking statements
information that a shareholder or potential investor in Lynas may require in order to determine including projections, guidance on future earnings and estimates are provided as a general guide
whether to deal in Lynas shares. It should be read in conjunction with Lynas Group’s other periodic only and should not be relied upon as an indication or guarantee of future performance. There can
and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), be no assurance that actual outcomes will not differ materially from these forward-looking
which are available at www.asx.com.au. This document is not a prospectus or a product disclosure statements.
statement under the Corporations Act (Cth) 2001 (Corporations Act) and has not been lodged with
ASIC. Investment Risk and other risks
Not investment or financial product advice An investment in Lynas shares is subject to investment and other known and unknown risks, some of
which are beyond the control of Lynas Group, including risk factors associated with the industry in
This Presentation is for information purposes only and is not financial product or investment advice which Lynas Group operates, such as: nature of mineral exploration and production; mineral and ore
or a recommendation to acquire Lynas shares and has been prepared without taking into account reserves; operations risks; project development risks; market price and demand risk; credit and
the objectives, financial situation or needs of individuals. Before making an investment decision, market risks; regulatory, political and environmental risks; tax and other risks generally relating to
prospective investors should consider the appropriateness of the information having regard to their equity investment.
own objectives, financial situation and needs and seek financial, legal and taxation advice
appropriate to their jurisdiction. Lynas is not licensed to provide financial product advice in respect of Not an offer
Lynas shares. Cooling off rights do not apply to the acquisition of Lynas shares.
This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any
Financial data securities in the United States. Any securities described in this Presentation have not been, and will
not be, registered under the U.S. Securities Act of 1933 (the “Securities Act”).
All dollar values are in Australian dollars (A$) unless stated otherwise and financial data is presented
within the financial year end of 30 June 2018 unless stated otherwise. Any pro forma historical Disclaimer
financial information included in this Presentation does not purport to be in compliance with Article 11
Lynas and its affiliates, officers, employees, agents and advisers have not authorised, permitted or
of Regulation S-X of the rules and regulations of the US Securities and Exchange Commission.
caused the issue, dispatch or provision of this Presentation to any third party. Lynas, its related
Future performance bodies corporate and their respective affiliates, officers, employees, agents and advisers to the
maximum extent permitted by law, expressly disclaim all liabilities in respect of any expenses,
Past performance information given in this Presentation is given for illustrative purposes only and losses, damages or costs incurred by you as a result of the information in this Presentation being
should not be relied upon as (and is not) an indication of future performance. This Presentation inaccurate or due to information being omitted from this Presentation, whether by way of negligence
contains certain “forward-looking statements”. The words “expect”, “should”, “could”, “may”, “will, or otherwise, and make no representation or warranty, express or implied, as to the fairness,
“predict”, “plan”, “scenario”, “forecasts”, “anticipates” “estimates” and other similar expressions are currency, accuracy, reliability or completeness of information. The information in this Presentation
intended to identify forward-looking statements. Indications of, and guidance on, future earnings and remains subject to change without notice.
2
Our long journey to deliver value
• 2011: The investment world discovers LYNAS ENTERPRISE VALUE
Rare Earths 4000
3500
• 2012: Lynas construction slower than
forecast 3000
2500
•
AUD millions
2013-2016: High debt, low cash
• US $425m debt 2000
• A $4.1m operating cash flow Debt
1500 Market Cap
• 2017: Lynas comes of age
• Producing at nameplate 1000
• Convertible bond converts
500
• 2018: Lynas NEXT growth project
• US $165m debt 0
• A $118.5m operating cash flow
3
Our product offering today
Product Capacity REO Market
tonnes/annum
NdPr+Nd+Pr Oxide & Metal 7,200
NdPr 5,400 Magnets
Nd 1,500 Magnets, Catalysts
Pr 300 Catalysts, Pigments, Magnets
SEG Oxide 1200 HRE Separation
Ce-La Carbonate, Oxide, Metal, Compounds 16,000
Ce Carbonate, Oxide Catalysis, Glass
La Oxide FCC, Ferrite, NiMH
LaCe Carbonate, Oxide, Metal Polishing, NiMH, Alloy
RE compounds Customized applications
4
Our track record underpins our confidence in the future
12,000 Production Volume REOt 220 Sales Revenue (A$'m)
10,000
170
8,000
6,000 120
4,000
70
2,000
0 20
H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19
NdPr (RTS) Others (RTS)
Cash Flow (A$'m)
NPAT (A$m) EBITDA (A$m) 100
(excl. AELB and Interest)
60 100 80
40 80
60
20 60
0 40 40
-20 20
20
-40 0
-60 -20 0
-80 -40 -20
-100 -60
-120 -80 -40
H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19
H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 H1 15H2 15H1 16H2 16H1 17H2 17H1 18H2 18H1 19
Net investing CF Net operating CF
5
Malaysia regulatory update
Operating License renewal
• Full Operating Stage License (FOSL) due for
renewal on 2 September 2019
• On 30 May 2019, the Malaysian
• License renewal application progressing to a Prime Minister acknowledged the
“normal” timetable
importance of the continued
• AELB Audit for renewal of the FOSL completed operation of Lynas in Malaysia
April 2019 - “Very Satisfactory” rating
• Lynas 2025 allows us to meet the
Residue Management new conditions proposed by the
• Malaysian government’s 2018 Executive Review Malaysian Prime Minister
Committee found Lynas residues are managed “in a
proper manner”
• Ongoing discussions with the Malaysian
government to finalize WLP management
requirements
6
Lynas 2025: Growing with the market
A larger business to meet • Efficient capacity expansion leveraging Lynas’ unique assets
forecast demand growth • 10,500 tpa NdPr products
Diversified Industrial footprint • Upstream processing close to the resource
with processing facilities in • Downstream processing close to our customers; Malaysia and US
optimal locations • Relocation of C&L to WA to satisfy Malaysian requirements
Supplier of choice to non
• Selected separated Heavy Rare Earth products
Chinese customers with a fit for
• Value added Cerium
market product portfolio
• A step change in production
Enhanced earnings • Improved portfolio pricing
• Continued flow sheet and cost efficiencies
• Self-funded with support of JARE
$500m Capital plan • Return on investment of planned growth initiatives is expected to
materially exceed WACC
• Enhancing long term shareholder value
7
Our track record underpins our confidence in the future
Malaysia
A dynamic operation in Gebeng with
increased investment in downstream
processing
Vietnam-Thailand
Vietnam-Thailand
Metal tollers.
Metal Tollers
United States Western Australia
Exciting market opportunity with An expanded WA operation
a skilled US based partner.
8
Developing our sources of unique competitive
advantage
Mt Weld Market position Inhouse Proven Operations Will to win
• A true Tier 1 • World’s second Intellectual • Established • Corporate culture
Resource largest Rare Earths Property operating assets founded on our
• Continuing producer • Technical, • Strong capital and capable and
exploration and • Only Rare Earths Engineering and operating cost resilient people
development to miner and processor culture • Focused on
Processing IP
maintain a 25+ year outside China
positions Lynas as building long term
Reserve at new • Established long-
the Rare Earths shareholder value
term, trusted
rates Centre of
relationships built
with our key Excellence outside
customers China
9
Our unique Tier 1 Rare Earth deposit 10
Mt Weld is favoured by grade, NdPr content, total REO and life of mine 11 11
Sustaining a 25+ Year Reserve in 2025
Coarse grain primary RE mineralisation will be much simpler to process
• Step change improvement in
grade and recovery
performance for current and
future ores
• Proven improved flowsheet Parisite +2mm
for new ores
• Exploration and new
flowsheet for Primary
Carbonatite
• Flowsheet for Direct
Processing of low grade ore
Direct Shipping Ore commenced March 2019 Coarse grained parisite mineral (115m depth)
Chemical Formula: Ca(REE)2(CO3)3F2
12Our competitiveness continues
to improve
• From 2014 to 2016, Lynas
operations stabilised
Lynas NdPr Production cost
Index: 100=Average 2016 • Mid-2016, both plants were running
250%
at design capacity
• Through Lynas NEXT, production
200%
capacity has increased to 7.2 ktpa of
150% NdPr and a wider product range
100%
• Processing costs are
continuously improving
50%
• Continued focus on cost efficiencies
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
in daily operations as well as
2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 breakthrough innovation programs
13Improving
Capital Efficiency
▪ Phase 1: 29 Flotation Cells
▪ Phase 2: 9 Flotation Cells
▪ Lynas NEXT: 1 Flotation Cell
▪ Lynas 2025: 3-5 Flotation Cells
43
14Lynas NEXT - Cracking and Leaching MgO Circuit Split, new heat exchangers added, new pumping designs, new hopper designs, changed filter configurations Redesigned WGT ducting Emissions improvements 15
Demand for NdPr is forecast
to accelerate from 2021
Global demand for fresh NdPr Oxide
70.0 • Energy International Agency: 125-220m
electric cars on the road in 2030
60.0
Equivalent to 88-155ktns additional
REO kt of NdPr Oxide
50.0 supply of NdPr over next 10 years
40.0 • Most new models will be launched in
2021 when growth of NdPr demand will
30.0 accelerate
20.0 • From late 2020s, end of life recycling will
affect demand for fresh oxide
10.0
0.0
2010 2015 2020 2025 2030
Wind Turbines Automotive Electrified Vehicles
Electronic & Medical Automation & Appliances Others
16Lynas is the partner of choice for securing a
sustainable magnet supply chain
• Lynas offers:
- Unique market expertise inside and outside China
- Independence from China
- Transparent downstream supply chain
- Can provide metal, alloy and recycling services through trusted
partners in addition to Rare Earth supply
- Full transparency of transactions
- Traceability from mine to magnet
• Recognized environmental performance:
- Silver medallist with Together For Sustainability
- United Nation Global Compact Signatory
- Life Cycle Assessment shared and communicated
17Our sales and marketing road map to 2025
Develop additional
value for other
products
Maintain 20-25% Extract Dy and Tb
- La all pre-sold via Prepare for
NdPr market share from our Heavy
long term contracts
through timely outside China Rare Earths and magnet recycling
capacity increases - New opportunities for develop Duncan
Ce that can increase
sales value by up to
10 times versus
current
18Our investment in Specialty Products
EBITDA from Ce-La products expected to be 3x higher in 2025 compared to 2018
Synthesis Lab
Analytical Lab
Application
Performation Lab
Pilot Plant
19Lynas has a key role to • Currently all Heavy Rare Earths (HRE)
play in Heavy Rare Earths separation is in China
Xinfeng ore value
• Dy and Tb are essential to high power electrical
250 60% motors
200 50%
% paid by Lighting
150
40%
• HRE in China is extracted from ionic clay, the
USD/kg
30%
100
20%
processing of which creates serious
50 10%
environmental problems. China Central
0 0% government has decided to reduce this source
Oct-06
Oct-09
Oct-11
Oct-12
Oct-14
Oct-17
Oct-05
Oct-07
Oct-08
Oct-10
Oct-13
Oct-15
Oct-16
Oct-18
of HRE to a minimum and ban imports of
Total Value Lighting Value similar resource from Myanmar
Dy and Tb Oxide Price history
750
• It is expected this reduction in supply while
demand is increasing (with the demand for
650
electric cars) will lead to a substantial price
550
increase
450
USD/kg REO
350 • Lynas has 50t/year of Dy and 20t/year of Tb
250
contained in its current ore blend. Future
campaigns will deliver 3 to 4 times this quantity.
150
50
• Lynas plans to invest in HRE separation
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
-50
Axis Title
Dy Ox CIF China Tb 4N CIF China
20Lynas-Japan alliance plays an essential role in RE market growth
Mining Separation Metal Alloy Magnet Component OEM
• Security of supply from Lynas has contributed to growth in
Japanese industry
• Lynas provides outside China automotive manufacturers with
confidence in Rare Earths technology
21Lynas – Blue Line partnership
Replicating in USA what we did in Japan
• MOU between Lynas and Blue Line Corporation for the joint
development of Rare Earths separation in USA
• Binding, conditional on funding approvals by both parties
• Exclusive for 12 months
• Primarily focusing on HRE separation but could include
LRE separation as well
• Lynas will provide technology and hold a substantive
majority interest in the JV
• Started in 2001, Blue Line is an independent Rare Earths
processor in USA, addressing the catalytic, ceramic,
nanomaterials and water treatment applications
• ISO 9001 certified, Blue Line has excellent recognized expertise
in Rare Earths product management
Hondo Texas
• This partnership will allow us to maximize the value of our Heavy
Rare Earths and accelerate the USA market growth by providing • A 53 hectare industrial site with train access
there a sustainable source of supply • A former ceramic plant purchased by Blue Line in 2010
for Rare Earths processing
22Blue Line’s ready-made facilities in Hondo, Texas
Shuttle Kiln
3 Tunnel Kilns Process Equipment
ISO Certification Powder Silos Programmable logic controllers Electricity & natural gas supply
2324
Competent Person’s Statement
COMPETENT PERSON’S STATEMENTS– MINERAL RESOURCES
The information in this report that relates to the 2018 Mineral Resources is based on information compiled by Mr Alex Whishaw under the
guidance of Dr Andrew Scogings. Mr Wishaw and Dr Scogings are full-time employees of CSA Global. Mr Wishaw is a member of the
Australasian Institute of Mining and Metallurgy. Dr Scogings is a Member of the Australasian Institute of Mining and Metallurgy, a Member
of the Australian Institute of Geoscientists and an RPGeo (Industrial Minerals). Dr Scogings has sufficient experience relevant to the style
of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as
defined in the 2012 Edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves
(JORC Code). Dr Scogings consents to the disclosure of information in this report in the form and context in which it appears.
COMPETENT PERSON’S STATEMENTS– ORE RESERVES
The information in this presentation which relates to the Ore Reserves estimate accurately reflect information prepared by Competent
Persons (as defined by the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves). The
information in this public statement that relates to the Mt Weld Rare Earths Project is based on information resulting from Feasibility
works carried out by Auralia Mining Consulting Pty Ltd. Mr Steve Lampron completed the Ore Reserve estimate. Mr Steve Lampron is a
Member and Chartered Professional (Mining) of the Australasian Institute of Mining and Metallurgy and has sufficient experience that is
relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify him as a
Competent Person as defined in accordance with the 2012 Edition of the Australasian Joint Ore Reserves Committee (JORC). Mr Steve
Lampron consents to the inclusion in the document of the information in the form and context in which it appears.
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